A spate of recent battles over arbitration agreements may force courts and lawmakers to once again tackle who can enter one on behalf of a nursing home resident — and whether they can ever be mandated as a condition of admission.

The Centers for Medicare & Medicaid Services last fall enacted a rule that prevents nursing homes from requiring such agreements in order for residents to start or continue receiving care.

But a ruling in Illinois earlier this month illustrates the conflict that can arise in states that view arbitration as a financial decision rather than one related to healthcare.

In Parker vs. Symphony of Evanston Healthcare, the Illinois Appellate Court for the First District ruled the skilled nursing provider couldn’t compel a resident’s daughter to arbitrate her negligence claims because the daughter held only a healthcare power of attorney. In Illinois, a judge said, a family member with a healthcare proxy can enter an arbitration agreement only if that agreement is a condition for receiving care.

In the case of former resident Mae Jefferson, that means her daughter, Kathy, can pursue negligence and wrongful death claims in court. More generally, it adds to growing concerns that states that don’t favor arbitration are actively working to make it an ineffective option for nursing home operators.

“The Supreme Court over the years has noted state hostility toward arbitration in a number of opinions and there’s kind of this ongoing tug of war between states and the Supreme Court on enforceability,” Jason Bring, partner and co-chair of Arnall Golden Gregory’s post-acute care team, told McKnight’s Long-Term Care News.

State courts are “somewhat, to me at least, working around the FAA [Federal Arbitration Act] and the Supreme Court holdings to say very specifically, if we look at who’s authorized to sign these agreements and focus in on that, we can effectively disallow arbitration by construing very narrowly who is authorized to sign on behalf of the resident,” Bring added

Bring outlined past cases in Kentucky and West Virginia that revealed such state workarounds. But even against that backdrop, Mark Reagan, managing shareholder of Hooper, Lundy & Bookman, said the Illinois Court’s “blunt instrument” of deciding the case on such a basis was “not well founded.” 

“Cases in this area typically turn on the individual state’s agency laws but the Illinois court decides the case entirely on whether executing the agreement is mandatory or voluntary,” he said. “That sole distinction is odd inasmuch as voluntary agreements are more consumer friendly, and here that distinction is used to defeat the voluntary decision” of an adult child holding an advanced healthcare directive or healthcare power of attorney. 

Reagan pointed to another ongoing case in California that also draws attention to the issue of who has the authority to bind a resident to an arbitration agreement, and how those agreements must be presented.

In a friend-of-the-court brief filed on behalf of the California Association of Health Facilities, for which Reagan is general counsel, he argued that if those with healthcare proxies can’t enter arbitration for residents, then thousands “would not be able to … take advantage of a lower cost and more expeditious alternative dispute resolution process.”

“In the context of long-term care specifically (and healthcare generally), the choice to utilize arbitration to resolve disputes that arise out of care and treatment is a healthcare decision,” Reagan wrote. “The decision certainly may have legal components (as do many elements that are covered by or outside the standard admission agreement) but those components do not disqualify it from being a healthcare decision. Rather, prohibiting an agent from making a decision about voluntary arbitration is tantamount to stripping them of the full power to make the full complement of health care decisions that California agency law supports.”

Reagan told McKnight’s that decisions like the one in Illinois and, potentially in California,  could “re-open” the possibility of state legislation to make these types of agreements mandatory.

“In addition, it could open up a new front of litigation alleging that this type of a judicial rule is preempted by the Federal Arbitration Act,” he said.

Bring said he continues to see strong reliance on voluntary arbitration agreements, which are signed by about 85% of residents or their representatives at his client facilities. Interestingly, a business manager in the Symphony case alleged that 85% of residents there declined to sign to them.

Bring added that facilities can strengthen their agreements by encouraging family members to seek a financial power of attorney before admission; making the arbitration paperwork part and parcel to admissions forms as an “addendum,” giving it more legal weight without requiring it; and ensuring that signers understand in plain language what they’re agreeing to, per CMS rules.

“On balance, the ability to push into arbitration provides a number of benefits: a faster, less expensive resolution process for everyone involved [and] it reduces the chance of a nuclear verdict and that’s what most people are most concerned about,” he said. “I don’t think anyone really has a problem with having a dispute resolved through a process so long as you know that it’s going to be fair and not result in a verdict that could threaten the viability of the organization.”